This Morning: MSFT Rising, Pesky AAPL Headlines, KLAC Surges

By Tiernan Ray

Shares of Microsoft (MSFT) are up 49 cents, or 1.7%, at $28.12 after the company last night slightly missed revenue estimates and beat on the bottom line by a penny in its fiscal Q1 report.

The Street this morning is adjusting estimates slightly, with no major changes up or down. Walter Pritchard with Citigroup reiterates a Buy rating and a $35 price target, writing that his math suggests the company sold about 700,000 to 800,000 of its Surface tablet computer. He thinks the “worst on the PC front may be behind the company.”

In other Microsoft news, following reports last night that the company’s partner Nokia (NOK) was number ten in smartphone sales last quarter, running Microsoft’s Windows Phone 8 software, DigiTimes’s Daniel Shen and Steve Shenthis morning write that Redmond is working with Qualcomm (QCOM) on a “reference design” for future Windows-based phones at lower prices for the Chinese market, citing multiple unnamed sources.

Shares of chip maker Cirrus Logic (CRUS) are up $2.17, or 8%, at $28.88 after the supplier of audio chips for Apple‘s (AAPL) iPhone and iPadlast night reported a better-than-expected Q4 but offered an outlook for the current quarter below expectations. Cannacord Genuity’s Bobby Burleson reiterates a Buy rating today while lowering his price target to $35 from a prior $52, writing that the uncertainty around demand for Apple’s iPhone 5 will weigh on Cirrus’s business.

Speaking of Apple (AAPL), the stock is down 67 cents today at $449.83, as the company gets hit with some negative news pieces this morning. The Wall Street Journal’s Scott Thurmlate yesterday penned an item strikingly similar to the one penned in Barron’s print magazine this past weekend by my colleague Vito Racanelli. The piece notes how stocks hit a ceiling at around $500 billion in market cap, which they have a hard time getting past. The Journal’s Digits column features a piece by Juro Osawa about Huawei challenging Apple and Samsung Electronics in the smartphone market. And The New York Post’s Garett Sloanethis morning writes that AT&T’s (T) CEO Randall Stephenson said on the company’s Q4 conference call last night that he is studying T-Mobile’s practice of removing subsidies for the iPhone by letting customers pay for the device over time.

Not that it would matter to Apple how the phone is paid for, but headlines like “Bad Apple Allergy” certainly are not a help to the shares on any given day.

Shares of chip equipment maker KLA-Tencor (KLAC) are up $4.95, or almost 10%, at $56.92, after the company last night beat fiscal Q2 estimates and offered a better-than-expected outlook for this quarter. The company said foundry customers are spending on equipment in a decent fashion. And the report later in the evening by Samsung that it will maintain capital spending about the same this year is giving a lift to chip equipment companies.

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There are 10 comments

JANUARY 25, 2013 11:12 A.M.

Ed wrote:

MSFT misses shares up, CRUS misses shares up, only in America!

JANUARY 25, 2013 11:16 A.M.

Anonymous wrote:

Nokia is a stock with great upside opportunity and why:

1) Nokia´s bankruptcy is already remote.
Nokia has increased net cash to about $5.7 billion.
Nokia´s worst loss has been $290 million a quarter in 2012.
Even with this kind of loss, Nokia could still deal by its own net cash for at least 4 years!

2) Nokia won´t have to deal with that kind of loss in the future and why

A. Nokia has cut cost expenses. The layoff in 2012 starts to be fully effective in 2013.

B. Now Nokia has to pay royalty to Microsoft, but Nokia has patent incomes.

C. Nokia has managed to make the important tough work for the basis of its new platform WP.
Nokia has already sold over 15 million Lumia phones up to date (9.9 million units from Lumia debut till the end of September 2012 + 4.4 million units in the last quarter of 2012 + January 2013).

D. Nokia has now a high end phone that can make "halo effects" and be compared to Apple´s and Samsung´s most high-end phone, the Lumia 920.
The demand of this phone is still high in many countries around the world. The 4Q12´s Lumia sales did not include the sales of Lumia 920 in many countries, such as India, Asia-Pacific, UAE, Latin America, and many other countries around the world yet, because the phone is arriving these countries only starting from January 2013.
Even in Europe, many countries start to get this phone starting 1Q13, for example the Netherlands announced the phone arriving in January.
And China Mobile received only first lot of Lumias 920T around Christmas, the second and third lot and further have arrived China, and the phone is still selling out.

E. China Mobile deal. When now, both China Mobile and China Unicom are subsidizing the Lumia 920 heavily, the 2-year or 3-year contract is starting from
0 or 1 yuan, and considering only less than 1/5 of Chinese people are using highest-end smartphones,

this will result into a huge number of 2-year or 3-year contract users for Nokia in China! Besides, 3G penetration in China is still very low, there is a huge opportunity there. Additionally, among the highest end phones, Nokia Lumia 920 is significantly much cheaper than for example iPhone 5 and Galaxy Note II. Nokia has an advantage in both the price competition and the biggest carriers´ backing in China!

F. Nokia Siemens Networks (NSN). During these few months NSN has won many 3G and 4G contracts in many countries.

According to NSN, they have network equipment that can boost the speed of 4G many times faster. This shows that, besides PureView camera technology, HD+ sensitive screen technology, advanced mapping platform HERE and City Lens, Nokia has also top innovations in building 4G LTE networks.

G. MWC is coming soon in Febuary. There are still more to come from Nokia.

According to The Verge, Nokia will launched PureView camera phone.

According to CEO Stephen Elop, Nokia is also planning a lot of interesting things with Verizon.

Nokia is likely launching tablet as well, even with some loyal fans of Nokia around the world buying some of Nokia´s tablets, this will be a good gain for Nokia.

Nokia will launch more Lumia phones in the coming months to attract different consumer demands. More lower price-point, mid-range and high-end WP8 Lumias are to come.

In 1Q13, beside Lumia 920 and Lumia 820 which are making their way to more markets and with better supplies, Nokia is also attracting the mass markets with budget WP phones

Lumia 620 and Lumia 505.

F. Asha phones. Asha phones are now selling almost 10 million units a quarter.
Asha phones are affordable and competitive. Asha phones have now more and more smartphone features.
Apart from features like Facebook, Twitter etc. Asha phones
have internet access and access to thousands of Nokia´s most popular apps.
Nokia has also brought an app called "Nearby" into Asha phones. Nearby is almost the same as City Lens in Lumia phones which is exclusive and unique in mapping and location data.
There is still plenty of room for Asha phones to grow, because the price is competitive (cheapest android is right now about $100, while Asha is only about $70 without any contract).
Apart from the features and price mentioned above, there are a couple of important and good selling points in Asha phones against cheapest androids: free games and music!
Asha phones are still profitable for Nokia, because the OS is from Nokia itself, Nokia does not have to pay royalty for it.

3) While bankruptcy is remote, Nokia´s stock price is still heavily undervalued.
NYSE tech stocks are usually 2x book value, Nokia is still way much below that.
According to Morningstar´s valuation, the sum of parts of Nokia (NSN, Navteq, feature phones, smartphones and patent portfolio)
is worth much more than Nokia´s stock price right now, not to mention Nokia´s $5.7 billion net cash added to that value!
Two years ago NOK was still about $15, now the stock is only over $4, the reason is taht the stock has been over sold.
Nokia is the most short sold stock in both Helsinki and New York! The shorts are still over 20% in Nokia´s total share number which is approximately 3.75 billion shares.
This is a huge number, considering Apple´s short interest is only around 1% and Samsung´s around 2%. When Nokia is here to stay, the shorts need to be covered and the stock will skyrocket from these levels.

Nokia Apple Intel (INTC) Microsoft (MSFT) Cirrus Logic (CRUS)
0.32 3.0 2 3.0 3.76
Note that Nokia is currently selling at 0.32 price/sales ratio. This means that if the company manages to restructure and return to normal profitability, the stock has the potential to become a 10x bagger (even from today's price levels) - assuming the market will value Nokia 3.0x sales like Apple or Microsoft. But even a price/sales ratio of 2, like Intel has, means a 6x bagger from these levels.

JANUARY 25, 2013 11:16 A.M.

Larry wrote:

Netfflix up 60% in 2 days. Boy, did the Wall Steet Crooks make billions on this smoke and mirrors story. What a set up this was. Perhaps Reed Hastings can run Apple now.

JANUARY 25, 2013 11:29 A.M.

Sal wrote:

The crooks made billions on Netflix. What
A nice scam by Icahn Hastings and the
hedges. Man did they set that smoke and
mirrors story up nicely. Reed Hastings
to be the new CEO of Apple

JANUARY 25, 2013 11:38 A.M.

Paul wrote:

Ashton Kutcher the next CEO of Apple!

JANUARY 25, 2013 11:43 A.M.

Rob wrote:

Ashton Kutcher will replace Cook as Apple
CEO.

JANUARY 25, 2013 12:46 P.M.

ron james wrote:

I'm tired of hearing inexperienced Apple shareholders crying about their plumetting share prices compared to other companies. You guys are neither wise nor mature enough to play the game.

JANUARY 25, 2013 1:04 P.M.

Jake_in_Seoul wrote:

Thanks for taking note of the continuing stream of negative headlines concerning AAPL. Daily fodder for those increasingly literate HFT algos? The resonance of the months-long press campaign against Apple in a wide variety of media globally, resonates very well with what I read daily in the Korean vernacular press. Almost as if most of the global financial press had suddenly learned to speak Korean :)

JANUARY 25, 2013 1:58 P.M.

Cameron Wilks wrote:

re: "Not that it would matter to Apple how the phone is paid for"

Yes it would matter. Today AT&T charges the same monthly price (say $90) whether I buy that new subsidized phone every 2 years or not. So I might as well buy it. But if I suddenly have a choice between getting a new phone or paying $20 less each month ($70), I might stick it out a bit longer with my old iphone. Others might upgrade sooner, since they can just buy another phone early on a new installment plan for just $20 more each month ($110 until the first installment plan ends).

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.